JPMorgan does a 180-degree turn: from expecting rate cuts to expecting rate hikes. What does this imply behind the change?

JPMorgan Chase suddenly adjusted its expectations for the Federal Reserve. Previously expecting a 25 basis point rate cut in January 2026, JPMorgan now has changed its stance, not only canceling the rate cut expectation for 2026 but also predicting a 25 basis point rate hike in Q3 2027. The magnitude of this reversal is significant and warrants serious attention.

Why is JPMorgan Chase so aggressively changing its stance?

Data became the turning point

The direct reason for JPMorgan Chase’s change is the recent non-farm payroll data. The US non-farm employment figures for December 2025 exceeded expectations, especially with the unexpected decline in the unemployment rate, which completely altered market expectations for Fed policy. According to the latest news, the probability of the Fed not cutting rates in January has risen to 96%. This is not speculation; it’s the market voting with real money.

Comparing the aggressiveness with other institutions

How aggressive is JPMorgan Chase’s expectation? Just look at what other institutions are saying.

JPMorgan Chase has become the most hawkish voice. The mainstream consensus is 2 rate cuts (June and September), while JPMorgan Chase directly states no cuts in 2026 and even expects rate hikes. Such aggressiveness is indeed rare among Wall Street giants.

What does this shift mean for the crypto market?

The reversal of interest rate expectations is a reversal for risk assets

The crypto market is most sensitive to Fed policy. Higher interest rates imply:

• Reduced attractiveness of risk assets, with cryptocurrencies as high-risk assets being the first to be affected
• Increased pressure on the US dollar’s appreciation, impacting non-US assets
• Rising costs for institutional investors, dampening enthusiasm for high-risk investments

This adjustment by JPMorgan Chase essentially indicates: the Fed’s tightening cycle may not be over, and there could even be rate hikes again in 2027. For investors betting on a rate cut cycle, this is undoubtedly a cold shower.

Short-term vs. long-term implications

In the short term, this news is bearish for the crypto market. The market is already digesting the “rate cut delay” message, and JPMorgan Chase’s aggressive expectation will further reinforce this pessimism.

In the long term, the expectation of rate hikes reflects the Fed’s confidence in the economy. This suggests that the US economy’s fundamentals may be stronger than the market imagines, and the decline in unemployment is not a fleeting phenomenon. From this perspective, it’s a positive outlook on the economy, just not friendly to high-risk assets.

What to watch for next?

JPMorgan Chase’s expectation is not a definitive forecast; key variables include:

• PCE inflation indicator: Can the inflation data that the Fed cares most about continue to fall back toward the 2% target? If inflation rebounds, JPMorgan Chase’s expectation may be revised again.
• Labor market trends: Is the unemployment rate stabilizing temporarily or rising again? JPMorgan Asset Management’s analysis indicates that poor employment market performance could open more room for rate cuts.
• Internal Fed disagreements: According to the latest news, there are clear divisions within the Fed on future policy, meaning expectations remain uncertain.
• Leadership changes: The current Chair Powell’s term ends in May 2026, and the selection of the new Chair could also influence policy direction.

Summary

JPMorgan Chase’s shift from expecting rate cuts to expecting rate hikes reflects more than just a data change; it signifies a fundamental reassessment of the Fed’s policy cycle. This change is more aggressive than other institutions, indicating that at least one top-tier investment bank believes the tightening cycle is far from over.

For the crypto market, this means the rate cut cycle expectations may need to be re-priced. In the short term, such negative expectations will continue to pressure risk assets. But from another perspective, if the US economy is truly strong enough to withstand rate hikes, it suggests that economic fundamentals have not weakened, which could support long-term valuations of risk assets.

The key will be upcoming inflation and employment data. These indicators will directly determine whether JPMorgan Chase’s expectations are revised again and will also influence the next direction of the crypto market.